chapter 11 1. Quantitative Problem: Bellinger Industries is considering two proj

Question

chapter 11

1. Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 7%.

a. What is Project A's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

=$  

b. What is Project B's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

=$

0 1 2 3 4 Project A -1,090 680 345 240 290 Project B -1,090 280 280 390 740

Explanation / Answer

Wacc 7% 0 1 2 3 4 Project A 90 680 345 240 290 NPV $1,444.00 Project B 90 280 280 390 740 NPV $                         1,479.14

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